Farm Ireland

Thursday 19 July 2018

Canada trade deal lays path for US – but at what cost?

LAST week, the EU agreed a new trade deal with Canada, which we are told will deliver an additional €26bn of trade between the two blocks on an annualised basis.

But what does it mean for Irish agri-business?

The fact is that some of the EU's agri interests were sacrificed in order for more lucrative industries such as pharmaceuticals and construction. Canada will now recognise patents on EU-made drugs for a longer period and open up big public procurement projects such as road building and energy supply to tenders from EU corporations.

In return, the EU has allowed Canada's 80,000 cattle ranchers to export an extra 50,000 tonnes of beef per year into the EU. The Canadian Cattlemens Association said that this could be worth up to €425m a year to the Canadian beef industry.

Growth hormones are used as standard in Canadian beef production, with farmers estimating that the hormones give them an efficiency boost of 20pc.

Beef produced with hormones is illegal in Europe and any Canadian beef exports will have to comply with this requirement.

However, with beef prices on their premium cuts that are up to 40pc lower than average EU prices, there is huge scope for the Canadians to export hormone-free beef into Europe.

Will the Canadians be interested in going head to head with the South Americans, who dominate the EU's annual 200,000 tonnes of beef imports?

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Like any business, the Canadians will be keen to diversify their customer base, and the EU is one of the most lucrative markets in the world, with a wealthy population of 500 million.

Canadians would have many cultural links with Britain, and so this is likely to be a key target for its exports. This is certainly going to put it up to the Irish beef industry. Not only do we rely on export markets for 90pc of our beef sales, but about half of all exports go to Britain, where we've targeted premium offerings.


However, the competition may be even stiffer when it comes to pork, where the EU has also conceded an additional 75,000 tonnes of Canadian pork imports.

The price gap between EU and Canadian pigmeat is even greater than beef, with Irish farmers currently receiving 30pc more for their pigs than their Canadian counterparts.

Canadians use growth hormones to give extra efficiency, but even factoring these out Canadian pork has the potential to undercut Irish pig products.

On the other side of the equation, EU farmers are expected to benefit from the extra dairy exports that are now free to be sold on Canadian markets tariff-free.

Surprisingly for many, the efficiency advantage lies with the Europeans when it comes to milk production. Canadian dairy farmers have benefited from even more protectionism than their European equivalents, and average milk prices are up to 40pc higher at farm level as a result.

So, the doubling of the amount of speciality cheeses that the EU will be able to export tariff-free is estimated to be worth up to €150m a year.

But the new cheese quota is only for cheeses with "geographical indicator status" – basically cheeses uniquely linked to the regions where they are or were originally produced.

Bizzarely, despite our €2.5bn dairy industry, Ireland has no products that fit this bill.

There may be more opportunity for dairy manufacturers to sell more infant formula and milk powders, but the Glanbias of this world are probably more interested in the huge growth potential in Africa, Asia and the Middle East.

However, the long-game in all of this is really about laying the foundations for an EU-US trade deal. With the close cultural ties between Ireland and the US population of 310 million, that's a market that a lot of Irish producers would love to get stuck into. The talks have already started, but they will take years to conclude.

In the meantime, the big question for Europe's farmers will be what price EU negotiators will be prepared to pay to get in the door.

Irish Independent